Here's my summary of the key events overnight that affect New Zealand, with news financial markets are getting even more complicated and unpredictable.
Are we getting too pessimistic about China? Recently some well-know investors like Kyle Bass and George Soros have been talking their book (they have short positions) wanting markets to price in a China stumble. But a long-term China bear now thinks the drum-beating has gone way too far. Jim Walker says the biggest risk now is being too pessimistic.
Yesterday, the Japanese yen climbed to its strongest level against the Kiwi dollar since late 2012 after the Bank of Japan left its monetary policy unchanged, the latest sign of how the risk from England's “Brexit” vote is tying global policy makers’ hands. And that got even more complicated with the murder of a left-wing English politician on the campaign trail. The attacker was probably motivated by anti-immigrant views rather than the more general political issues.
In Hong Kong, their property markets are in trouble. One major developer there is breaking the mold by offering 120% mortgages to shift their new-builds. They do require security over another property, but still, this is the sign of desperation and what can happen when markets turn.
Some markets haven't turned lower. Vancouver, Canada is still rising at a phenomenal rate, up +32% in volume from a year ago on the back of a construction boom that is addressing latent demand. Average prices are up +16% at the same time to an eye-watering NZ$1,154,000. When latent demand is left to fester and build over many years, addressing it can throw up unexpected outcomes.
In Australia, the RBA yesterday released some research you don't see everyday. Australia's poorest households enjoyed the biggest gains in wealth over recent years, challenging the recent claims inequality is getting worse. They found the bottom 20% saw their wealth increase by more than 21% between 2010 and 2014. However the middle classes saw almost no real growth in wealth, and those in the top 20% actually suffered a drop. The main driver of these shifts was their compulsory employer-paid superannuation program.
The benchmark UST 10yr yield has slipped further today and is now down to 1.56%. Yesterday we saw local rates fall they start today with the 1-5 curve at just +14 bps and the 2-10 at just +47 bps, both the flattest since May 2015. And prior to that brief period you need to go back to 2008 to find a yield curve this flat. Low rates pose an enormous risk for fixed-income investors who now stand to lose big-time when rates start tracking higher.
The oil price is still falling and has sunk $1 in the past 24 hours. The US benchmark is now just under US$47/barrel and the Brent benchmark just under US$48/barrel.
The gold price is unchanged however at US$1,289/oz.
And finally, the NZ dollar, is also pretty much unchanged from this time yesterday at 70.6 US¢, at 95.7 AU¢, and at 62.8 euro cents. The TWI-5 index is now at 74.
If you want to catch up with all the local changes yesterday, we have an update here.
The easiest place to stay up with event risk today is by following our Economic Calendar here ».
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